Whether you’re filing your 2025 individual income tax return or planning for 2026, it’s important to know if you can deduct vehicle-related expenses. A change that was made permanent by last year’s One Big Beautiful Bill Act (OBBBA) limits who can claim a deduction for business mileage. But you might still be eligible, and deductions also may be available if you use your vehicle for certain nonbusiness purposes.
Historically, if you were an employee, you potentially could deduct unreimbursed business mileage as a miscellaneous itemized deduction subject to a 2% of adjusted gross income (AGI) floor. But for 2018 through 2025, the Tax Cuts and Jobs Act (TCJA) suspended miscellaneous itemized deductions subject to the 2% floor. And the OBBBA made that suspension permanent.
This means employees can’t deduct business mileage related to their employment. (However, if your employer reimburses you for mileage under an accountable plan, those reimbursements are excluded from your taxable income.)
If you’re self-employed, expenses for business use of your vehicle are deducted from self-employment income. Therefore, they’re not affected by the permanent suspension of miscellaneous itemized deductions subject to the 2% floor and are still deductible — as long as they otherwise qualify. For example, commuting doesn’t qualify, but driving from your home or office to a customer’s location does generally qualify.
Here are three other types of vehicle use that might make you eligible for mileage deductions:
Rather than keeping track of your actual vehicle expenses, you can use a standard mileage rate to compute your deductions. The rates vary depending on the driving purpose and the year:
The business rate is significantly higher because it takes into account depreciation, which isn’t an allowable vehicle expense deduction for medical, moving, or charitable deduction purposes. The charitable rate is the lowest because it isn’t annually indexed for inflation. Occasionally, when gas prices increase substantially during the year, the IRS will increase the mileage rates midyear.
If you choose to claim deductions based on the standard mileage rate, you may also deduct actual parking fees and tolls.
Without adequate records, the IRS may disallow your vehicle expense deduction, even if the expense would otherwise qualify. If you use the standard mileage rate, your records should show the date, mileage, purpose, and destination of each trip. A mileage log kept throughout the year is one of the simplest ways to support your deduction.
If you choose to deduct actual expenses, documentation is also critical. The specific expenses you can deduct depend on whether you’re claiming the deduction for business, moving, medical, or charitable use of your vehicle.
If you’re self-employed or itemize deductions, you’re more likely to be able to benefit from vehicle-related deductions. But other factors can affect your potential benefit, such as whether your total expenses exceed applicable deduction floors. Also, keep in mind that you might be eligible for the new auto loan interest expense deduction for a vehicle purchased in 2025 or 2026.
Contact us to discuss your particular situation. We can help you claim any vehicle-related deductions you’re entitled to on your 2025 return if you haven’t filed yet. And we can help determine what steps you can take now to maximize your deduction opportunities for 2026.
